April 24, 2014 archive

Cross posted from The Stars Hollow Gazette

In an article for Huffington Post, economist Dean Baker explains the basic point of Thomas Piketty’s best selling book, “Capital for the 21st Century,” which has the economic world buzzing.

Piketty’s basic point on this issue is almost too simple for economists to understand: If the rate of return on wealth (r) is greater than the rate of growth (g), then wealth is likely to become ever more concentrated.

To stem the growth of the wealth gap, Piketty suggests a “Global Wealth Tax” which in today’s global political climate isn’t likely to happen. So what can be done? Baker offers some solutions:

A new I.M.F. analysis found the value of the implicit government insurance provided to too big to fail banks was $50 billion a year in the United States and $300 billion a year in the euro zone. The euro zone figure is more than 20 percent of after-tax corporate profits in the area. Much of this subsidy ends up as corporate profits or income to top banking executives.

In addition to this subsidy we also have the fact that finance is hugely under-taxed, a view shared by the I.M.F. It recommends a modest value-added tax of 0.2 percent of GDP (at $35 billion a year). We could also do a more robust financial transactions tax like Japan had in place in its boom years which raised more than 1.0 percent of GDP ($170 billion a year).

In this vein, serious progressives should be trying to stop plans to privatize Fannie and Freddie and replace them with a government subsidized private system. Undoubtedly we will see many Washington types praising Piketty as they watch Congress pass this giant new handout to the one percent.

The pharmaceutical industry also benefits from enormous rents through government granted patent monopolies. We spend more than $380 billion (2.2 percent of GDP) a year on drugs. We would spend 10 to 20 percent of this amount in a free market. We would not only have cheaper drugs, but likely better medicine if we funded research upfront instead of through patent monopolies since it would eliminate incentives to lie about research findings and conceal them from other researchers.

There are also substantial rents resulting from monopoly power in major sectors like telecommunications and air travel. We also give away public resources in areas like broadcast frequencies and airport landing slots. And we don’t charge the fossil fuel industry for destroying the environment. A carbon tax that roughly compensated for the damages could raise between $80 to $170 billion a year (0.5 to 1.0 percent of GDP). [..]

In addition to the rent reducing measures listed above, there are redistributionist measures that we should support, such as higher minimum wages, mandated sick days and family leave, and more balanced labor laws that again allow workers the right to organize. Such measures should help to raise wages at the expense of a lower rate of return to wealth.

In an interview with Bill Moyers, Nobel Prize-winning economist and New York Times columnist Paul Krugman, talks about Piketty’s “magnificent” new book and what the 1% don’t want us to know.

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This Day in History

Cross posted from The Stars Hollow Gazette

This is your morning Open Thread. Pour your favorite beverage and review the past and comment on the future.

Find the past “On This Day in History” here.

(Click on images to enlarge)

April 24 is the 114th day of the year (115th in leap years) in the Gregorian calendar. There are 251 days remaining until the end of the year.

On this day in 1916, Easter Rebellion begins.

On Easter Monday in Dublin, the Irish Republican Brotherhood, a secret organization of Irish nationalists led by Patrick Pearse, launches the so-called Easter Rebellion, an armed uprising against British rule. Assisted by militant Irish socialists under James Connolly, Pearse and his fellow Republicans rioted and attacked British provincial government headquarters across Dublin and seized the Irish capital’s General Post Office. Following these successes, they proclaimed the independence of Ireland, which had been under the repressive thumb of the United Kingdom for centuries, and by the next morning were in control of much of the city. Later that day, however, British authorities launched a counteroffensive, and by April 29 the uprising had been crushed. Nevertheless, the Easter Rebellion is considered a significant marker on the road to establishing an independent Irish republic.

Following the uprising, Pearse and 14 other nationalist leaders were executed for their participation and held up as martyrs by many in Ireland. There was little love lost among most Irish people for the British, who had enacted a series of harsh anti-Catholic restrictions, the Penal Laws, in the 18th century, and then let 1.5 million Irish starve during the Potato Famine of 1845-1848. Armed protest continued after the Easter Rebellion and in 1921, 26 of Ireland’s 32 counties won independence with the declaration of the Irish Free State. The Free State became an independent republic in 1949. However, six northeastern counties of the Emerald Isle remained part of the United Kingdom, prompting some nationalists to reorganize themselves into the Irish Republican Army (IRA) to continue their struggle for full Irish independence.

Background

The Act of Union 1801 united the Kingdom of Great Britain and the Kingdom of Ireland, abolishing the Irish Parliament and giving Ireland representation at Westminster. From early on, many Irish nationalists opposed the union and what was seen as the exploitation of the country.

Opposition took various forms: constitutional (the Repeal Association; the Home Rule League), social (disestablishment of the Church of Ireland; the Land League) and revolutionary (Rebellion of 1848; Fenian Rising). Constitutional nationalism enjoyed its greatest success in the 1880s and 1890s when the Irish Parliamentary Party under Charles Stewart Parnell succeeded in having two Home Rule bills introduced by the Liberal government of William Ewart Gladstone, though both failed. The First Home Rule Bill of 1886 was defeated in the House of Commons, while the Second Home Rule Bill of 1893 was passed by the Commons but rejected by the House of Lords. After the fall of Parnell, younger and more radical nationalists became disillusioned with parliamentary politics and turned towards more extreme forms of separatism. The Gaelic Athletic Association, the Gaelic League and the cultural revival under W. B. Yeats and Lady Augusta Gregory, together with the new political thinking of Arthur Griffith expressed in his newspaper Sinn Féin and the organisations the National Council and the Sinn Féin League led to the identification of Irish people with the concept of a Gaelic nation and culture, completely independent of Britain. This was sometimes referred to by the generic term Sinn Féin.

The Third Home Rule Bill was introduced by British Prime Minister H. H. Asquith in 1912. The Irish Unionists, led by Sir Edward Carson, opposed home rule in the light of what they saw as an impending Roman Catholic-dominated Dublin government. They formed the Ulster Volunteer Force on 13 January 1913.

The Irish Republican Brotherhood (IRB) saw an opportunity to create an armed organisation to advance its own ends, and on 25 November 1913 the Irish Volunteers, whose stated object was “to secure and to maintain the rights and liberties common to all the people of Ireland”, was formed. Its leader was Eoin MacNeill, who was not an IRB member. A Provisional Committee was formed that included people with a wide range of political views, and the Volunteers’ ranks were open to “all able-bodied Irishmen without distinction of creed, politics or social group.” Another militant group, the Irish Citizen Army, was formed by trade unionists as a result of the Dublin Lockout of that year. However, the increasing militarisation of Irish politics was overshadowed soon after by the outbreak of a larger conflict-the First World War  and Ireland’s involvement in the conflict.